Why Americans Are So Angry Despite the Boom

The American economy is thriving, unemployment recently hit a record low and inflation has fallen. Despite these positive economic developments, Americans are unhappy with the current state of the US economy and the performance of the Biden administration.

In their new study for the American Academy of Arts and Sciences, Katherine Cramer and Jonathan Cohen explore why. Their central finding is that relative economic insecurity and downward mobility explain a lot about the rise of populism. We invited them to discuss this with Teresa Ghilarducci (The New School, New York) as part of our New Economy Short Cut series.

Cramer and Cohen found that the fact that the US economy is doing quite well – according to many economic indicators – is not reflected in the way Americans feel about it. Ghilarducci came to a similar conclusion in her research paper. She states that people don’t have a problem with rich people per se. It’s more about relative economic security, i.e. people are truly concerned about their own status and their children. The main problem is downward mobility, i.e. people feeling that there is not much they can do to improve their situation.

But why are people still worried about finding a job when we have a record low unemployment now? Teresa Ghilarducci suggests that just because people have a job does not mean they feel good about their job and the economy. Also, people remember that wages are not rising as much as they used to relatively. Moreover, when people feel insecure and think that other people are doing better than they are, they feel resentment. It’s all about the feeling that you work hard and still do not get what you deserve, while others do. In this context, regional differences play an important role, too. According to the two authors, people’s understanding of the economy is very much based on the everyday challenges they face with the economy. Even if people’s financial situation is good, they may feel that the economy is not doing well.

So what can be done? Katherine Cramer suggests that people need to get access to more information about what the government is doing for them. Meanwhile, we need more tangible, direct policies to help people understand how e.g. industrial policy benefits them. On a hopeful note, Teresa Ghilarducci underlines that this is what Biden is already trying to do, by telling people that the government is not just there to correct market failures, but to make it better, and by convincing them that investing today will pay off in the future. In short, the goal is to make people feel more economically secure.